The approximate external rate of return is approximation because a) all net savi

ID: 1165627 • Letter: T

Question

The approximate external rate of return is approximation because

a) all net savings earned by a project are assumed to be invested at the MARR

b) all receipts that occur when a project balance is negative are assumed to be invested at the MARR

c) all receipts are assumed to be invested at the MARR

d) it can be computed only as a trial ERR

a) all net savings earned by a project are assumed to be invested at the MARR

b) all receipts that occur when a project balance is negative are assumed to be invested at the MARR

c) all receipts are assumed to be invested at the MARR

d) it can be computed only as a trial ERR

ERR is the rate of return which makes PW of Costs equal to FW of Revenue and if ERR is less than MARR then we cannot proceed with this project.

In this case all net savings that is (Revenue-Cost) is assumed to be invested at the MARR

Hence option A is correct response here

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